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1993 (2) TMI 339

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..... t constituted an Advisory Committee. The said Advisory Committee submitted its recommendations. After considering those recommendations the impugned order dated 4th of August, 1986 was issued directing "certain articles/class of articles to be exclusively reserved for production by handlooms". It is this order which is attacked on the following grounds in all these cases. 2. The "Act and the impugned order are violative of Article 14 and 19(1)(g) of the Constitution." 3. According to Mr. M.N. Krishnamani, learned Counsel for the petitioners total reservation of certain items of textiles in favour of handloom would have the effect of creating a monopoly. This court in State of Rajasthan v. Mohan Lal Vyas AIR 1971 SC 2068 has categorically laid down that no monopoly can be created in favour of an individual. Similar views have been expressed by the High courts as seen from Municipal Committee v. Hdji Ismail and Maniram Budha Chamar v. Parnalal Motiram Chamar AIR 1962 MP 275 . 4. Equally, when there is a total prohibition of manufacture of these clothes by the powerloom sector, that again, violates Article 19(1)(g) of the Constitution. In support of his submission, .....

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..... under Article 19(1)(g) of the Constitution have been violated by Sections 3, 4, 5 and 18 of the Act. Such restrictions amounting to prohibition have been struck down by this Court in Mohd. Faruk v. State of Madhya Pradesh [1970] 1 SCR 156 and Municipal Corporation of the City of Ahmedabad v. Jan Mohammed Usmanbhai [1986] 2 SCR 700 . 12. If the restrictions are unreasonable, certainly the court will refuse to uphold the same. 13. Mr. Altaf Ahmad, learned Additional Solicitor General appearing for the respondent, Union of India, meeting these arguments, states as follows. 14. The Cotton Textile (Control) Order, 1948 is traceable to List III Entry 33 of 7th Schedule of the Constitution. While the impugned Act is covered by List II Entries 24 and 27 this is supplementary to the Industrial Development and Regulation Act, 1951 which is traceable to List I Entry 52 of the 7th Schedule. Under the Industrial Development and Regulation Act Section 2 talks of declaration. Section 3(h) states as to what is meant by Schedule. Section 3(i) states "Schedule" means a Schedule to this Act. Item 23 of 1st Schedule deals with textiles including those dyed, printed or otherwise processed. Ha .....

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..... ituted to go into handloom, power loom and textile mill industries. Based on this, from time to time, textile policy statements were issued. In the year 1981 and 1985, it is found that next only to agricultural sector, handloom sector provides major rural employment. Therefore, the impugned Act is a product of over all assessment to protect a handloom industry which was sinking in spite of the various concessions. 18. It is incorrect to state that the power loom sector has come to be affected. Originally, the holders of four power looms were exempt. But these power loom owners diverted their products to larger power loom owners. Once those textiles enter the market there was no possibility of finding out whether they had been manufactured by the owners of four power looms. 19. Therefore, it became necessary to impose this prohibition. When the Act advances a directive principle contained under Article 39(b) and (c), it cannot be called unreasonable. 20. We shall first examine the background leading to the passing of the impugned enactment. 21. On 8.1.63, the Government of India appointed a committed, called "The Powerloom Enquiry Committee" under the Chairmanship of Shri .....

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..... e dispersed nature of the industry, the much needed orientation of production to market need is very much wanting in the handloom sector. Yet more important is the inherent technological disadvantage of the handloom sector and the unequal competition that it has to face from the mill and power loom sector on this account. 24. It is a matter of common knowledge that the bulk of the handlooms in the country produce 'break and butter item' such as grey dhoties, sarees, towels and plain household fabrics. It is these looms which have suffered on account of the growing competition from the power looms. It is in this context that the reservation of certain items of handlooms acquires importance. 25. In order to obviate the possibility of further litigations, the study Group feels that it would be advisable to have a separate legislation for the handloom sector. The Expert Committee observed in April 1985 thus: The vast growth of power looms has been due to certain advantages which they have enjoyed vis-a-vis the composite mills. These are low wages, low fiscal levies on yarn, absence of levy on grey fabrics which are the only products of the powerlooms, wholesale evasion of prote .....

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..... contributory thrift fund scheme and worshed-cum-housing scheme would be taken up in the Seventh Plan. 26. Due to the recommendations of the various committees under the textile policy statements announced by the Government from time to time, the reservation of certain articles for production of handloom had continued form 1.6.1950 under the Cotton Textiles (Control) order, 1948 issued under Section 3 of the Essential Commodities Act, 1955. However, experience showed that these orders were challenged in course of law, from time to time. The thrust of the argument on behalf of the powerloom was that they had given higher production and the powerloom cloth was cheaper than handloom fabric. Therefore, it was contended that the Notification issued under the Essential Commodities Act which, in effect, seeks to prohibit production was not in consonance with the Essential Commodities Act. It was further urged that the Notification provides for exemption from compliance of reservation order if sufficient reason was adduced by the producer. It was claimed by the powerloom owners that they were not afforded such an opportunity to adduce evidence. To overcome such difficulties, Government of I .....

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..... er the provisions of the Bill, provides for prohibition of manufacture of such articles of class of articles by powerloom or the other sectorism penalties for the contravention of the provisions of the order and other matters necessary for implementing the provisions of the Bill also provides forgiving an exemption to certain articles covered by the order if the Central Government considers it necessary so to do for the purposes of the Handloom industry. 28. With this background, we will examine the provisions of the Act in juxtaposition to the Industrial Development and Regulation Act and Cotton Textile Control Order. 29. The Cotton Textile Control Order is an order issued under the Essential Commodities Act. The object of the Essential Commodities Act is to provide, in the interest of general public, for the control of the production, supply and distribution, and trade and commerce in certain commodities. Sub-section (1) of Section 3 states as follows: Notwithstanding anything contained in the Industries (Development and Regulation) Act, 1951, the Central Government may, if it is satisfied, after considering the recommendations made to it by the Advisory Committee, that it is nec .....

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..... osiery, carpets and druggets; 4. made wholly or in part of silk, including silk yarn and hosiery; 5. made wholly or in part of synthetic, artificial (man-made) fibres, including yarn and hosiery of such fibres. 33. The impugned Act is traceable to Items 24 and 27 of List II of the 7th Schedule of the Constitution which run as under: 24. Industries subject to the provisions (Entries 7 and 52) of List I. 27. Production, supply and distribution of goods subject to the provisions of Entry 33 of List III. 34. Therefore, handloom industry has been taken out of Industrial Development and Regulation Act and a separate enactment has been made. 35. In the light of the foregoing provisions, we shall examine the question whether Cotton Textile Control Order and the impugned Act can operate in the same field. Section 6 of the Essential commodities Act states: Effect of orders inconsistent with other enactments: Any order made under Section 3 shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than this Act or any instrument having effect by virtue of any enactment other than this act. 36. In view of the non-obstante clause it is argued that the Cot .....

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..... isions of entry 33 of List III. List III, Entry 33: As it stood prior to its amendment: Trade and commerce in and production, supply and distribution of, the products of industries where the control of such industries by the Union is declared by Parliament by law to be expedient in the public interest. Entry 33 as amended by the Constitution Third Amendment Act, 1954: trade and commerce in, and the production, supply and distribution of,- (a) the products of any industry where the control of such industry by the Union is declared by Parliament by law to be expedient in the public interest, and imported goods of the same kind as such products; (b) foodstuffs, including edible oilseeds and oils; (c) cattle fodder, including oilcakes and other concentrates; (d) raw cotton, whether ginned or unginned, and cotton-seed; and (e) raw jute. Production, supply and distribution of goods was no doubt within the exclusive sphere of the State Legislature but it was subject to the provisions of Entry 33 of List III which gave concurrent powers of legislation to the Union as well as the States in the matter of trade and commerce in, and the production, supply and distribution of, the products of i .....

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..... y with handloom. The order issued under Section 3 of the Act is only for protection and development of handloom industry. There is no question of both the Cotton Textile Control Order and the impugned Order operating in the same field. 44. Hence, this argument is rejected. 45. The next argument is that Clause 20 of the Cotton Textile Control Order enables the Textile Commissioner to have an over all view while under Section 3 of the impugned Act regard is to be had only to the handloom industry. 46. We may now extract Clause 20 of the Cotton Textiles (Control) Order, 1948 which runs as follows: 20. (1) The Textile Commissioner may, from time to time, issue directions in writing to any manufacturer or class of manufacturers, or manufacturers generally regarding- (a) the classes or specifications of cloth or yarn which each manufacturer or class of manufacturers, or manufacturers generally shall or shall not manufacture, or (b) the maximum or minimum quantities thereof which such manufacturer, or class of manufacturers generally shall manufacture during such period as may be specified in the order: Provided that in issuing the direction under this sub-clause the Textile Commissioner .....

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..... nerally manufactured in the mill and powerloom sectors have been left out from reserved items. Only those items which have traditionally been manufactured on handlooms have been reserved for this sector. As a matter of fact, the reservation orders in favour of handloom have been on the statute book since 1950. But this has not deterred the growth of powerloom sector in the last three decades. Recently when the powerloom started producing the items which were traditionally being manufactured on handlooms, that caused a serious in road into the handloom industry. The result was an unequal competition for the handloom sector. If, as rightly pointed out in the counter affidavit of the Union of India, handloom industry is the biggest cottage industry in the country and is next only to agricultural sector in providing rural employment, certainly, the accusation that the impugned order had created a monopoly in favour of handloom industry is totally baseless. In this connection, the estimates of 1977-78 6th Lok Sabha in its report on powerloom industry made the following observations and it is worthwhile to extract them: It has, however, to be ensured that this growth of powerloom industr .....

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..... by the Government to handloom weavers because the livelihood of handloom weavers is threatened due to the production of all types of items and varieties by the powerloom industry. It is common knowledge that the handloom weavers are economically very poor and will have no alternative employment in the rural areas unless protected through reservation of varieties for them. So poor is the weaver that he could well say in the words of Karl Marx: Half a century on my back and still a pauper. 55. Therefore, the contention that there is a total prohibition, is untenable and the case relied on by Mr. Krishnamani, learned Counsel, namely Rustom Cavasjee cooper v. Union of India [1970] 3 SCR 530 has no relevanced. 56. No doubt, there are restrictions under the impugned order but the question would be whether they are reasonable. The Act, as seen above, has come to be enacted for the protection of the interests of the handloom weavers, mostly concentrated in rural areas. They are pitted against powerful sector, namely, the mills and the powerloom. As such, they face unequal competition. The restrictions are not only reasonable but also fully justified. Further, the objectives sought to be a .....

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..... at page 376 it was held thus: that the word "restriction" in Articles 19(5) and 19(6) of the Constitution includes cases of "prohibition" also; that where as restriction reaches the stage of total restraint of rights special care has to be taken by the Court to see that the test of reasonableness is satisfied by considering the question in the background of the facts and circumstances I under which the order was made, taking into account the nature of the evil that was sought to be remedied by such law, the ratio of the harm caused to individual citizens by the proposed remedy, the beneficial effect reasonably expected to result to the general public, and whether the restraint caused by the law was more than was necessary in the interests of the general public. 60. On the point of violation of Article 14, a reasonable classification is permissible under the equality clause. Of course, the classification made should be based on intelligible differentia. Further, there should be a nexus in such differentia with the objects sought to be achieved by the particular law. Article 14 requires that all persons subject to a legislation must be treated alike. In other wor .....

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..... s the families of the poor weavers are ruined by encouraging power-loom. It may be tat the cost of production in the powerlooms sector is less but if it is the object of the Government to encourage handloom for continued employment of handloom weavers in rural areas, certainly, nothing worthwhile can be said against the impugned reservation. Besides, even under the Notification issued by the Textile Commissioner on 15.4.77 many of the items stated as being produced by petitioner were reserved for the handloom sector. These items are sarees with borders, lungies, chaddars, bed sheets, bed covers, counter panes, low read pick cloth table clothes, napkins, duster, towels and cotton crepe fabrics. If violating this order, the petitioner has been manufacturing these interns which are specifically reserved for handlooms, it cannot be allowed to continue to indulge in such violation any further. Thus, we reject the argument complaining of violation of Article 14 of the Constitution. Sub-section (1) of Section 3 of the impugned Act states that the order specifying the articles for exclusive production of handloom could be issued for the protection and development of handloom industry from .....

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